On 23 February 2025, Germany went to the polls, and the subsequent coalition talks between the CDU/CSU and SPD concluded on 9 April, resulting in a coalition agreement entitled ‘Responsibility for Germany’. The 146-page document outlines the main priorities for governmental action in the next four years, including on Europe, some of which are spelt out in concrete terms, with others left deliberately vague. In this policy brief, Jannik Jansen, Johannes Lindner and Thu Nguyen analyse what the coalition agreement between the CDU/CSU and SPD says on key EU policy areas and what can be expected from the next German government on the EU budget and economy, climate, security and defence, migration, and lastly, institutional aspects that will affect the future of the EU.
Introduction
A new coalition: From progress to responsibility
On Sunday, 23 February 2025, Germany went to the polls. As predicted in pre-election polling, the Christian Democrats (CDU/CSU) under chancellor candidate Friedrich Merz emerged as the strongest party, leading them to enter into negotiation talks with the SPD. In a paper published shortly after the elections, we offered an initial assessment of the results and their implications for Europe, highlighting that the stakes for the incoming German government could not be higher. Mounting pressure for a unified European response to escalating geopolitical challenges were intensified by Trump’s early announcements and actions as re-elected US President. With many European eyes on Berlin, Merz had set Easter as the deadline for forming a government, underscoring the urgency of the moment with the words: “The world is not waiting for us.” While he will miss that Easter mark, the coalition negotiations progressed more smoothly than many had anticipated given the number of potential points of contention between the prospective coalition partners. Most notably, Merz managed to get the big question of the debt brake out of the way even before the new Bundestag had been constituted.
The coalition talks concluded on 9 April, resulting in a coalition agreement entitled ‘Responsibility for Germany’. The 146-page document reflects the compromises between the prospective partners and outlines the main priorities for governmental action in the next four years – some of which are spelt out in concrete terms, while others have been left deliberately vague. Beyond setting the policy agenda, ideally the agreement is also supposed to head off intra-coalition conflicts by resolving contentious issues during the negotiation; and by bringing together 250 politicians in 16 working groups its negotiation was also a first big team building exercise for the new coalition. While not legally binding, the agreement serves as a political benchmark against which the government’s performance will be judged by the electorate at the end of the legislative period. The agreement will be put to a vote of approval by the SPD members running until 29 April. As things stand, Merz is due to be elected chancellor by parliament on 6 May, taking the reins of a new German government on which huge expectations rest – both domestically and across Europe.
On Europe in particular, Merz campaigned on providing clearer leadership and a more cohesive European stance compared to that of the previous government under Olaf Scholz. In the coalition agreement, this ambition is reflected more in how power is concentrated, but less so when it comes to specific policy proposals. While most of the contours of the next German government’s EU policy are scattered across the agreement’s various chapters on policy, there is also one dedicated Europe chapter at the end of the document. Its tone is decidedly pro-European, signalling openness and constructive support for much of the current Commission’s agenda. However, it remains vague on key issues and lacks the federalist ambition that characterised the previous coalition agreement.
Perhaps the most notable shift lies in the centralisation of EU coordination within CDU hands. The three ministries in charge of EU coordination – the Chancellery, the foreign ministry and the economy ministry – will all be led by CDU politicians. This arrangement will give the party a lot of leeway in coordinating the different files and enable Merz to concentrate much of the decision-making on EU and foreign policy in the Chancellery. For the SPD, the strategic challenge thus becomes how to assert influence on EU coordination. Much will depend on its ability to strengthen other key portfolios – most notably the finance ministry, which will be led by an SPD minister – as well as to elevate the party leaders’ coordination round into an effective steering and counterbalancing mechanism on EU policy.
The Big Fiscal Bang before the coalition agreement
The real paradigm shift took place before formal coalition negotiations even began. The three centrist parties – CDU/CSU, SPD, and Greens – fell short of securing the two-thirds majority required to amend Germany’s Basic Law. This meant that any constitutional changes, such as a reform of the debt brake or the creation of new off-budget special funds, would require support from The Left in the new parliament. While The Left expressed openness to negotiations on a broader debt brake reform, its policy positions deviate sharply from those of the CDU/CSU – particularly on defence spending and welfare expansion. The CDU/CSU’s longstanding ‘no-cooperation rule’ with The Left further complicated this path.
In this context, CDU/CSU leader and chancellor-in-waiting Friedrich Merz executed a remarkable U-turn in the days after the elections. After months of campaigning on a platform of clear fiscal prudence – firmly rejecting initiatives from the Greens and Social Democrats to reform the debt brake, while insisting that reprioritising within the existing budget would be enough to address Germany’s persistent investment gaps – Merz abruptly reversed course. Explicitly referencing Mario Draghi, Merz declared that – in the face of threats to European security and Donald Trump’s warning that the US might abandon support for Ukraine – Germany must do “whatever it takes” on defence, squeezing through the narrow legislative window of the outgoing Bundestag to push through a reform of the debt brake.
The CDU/CSU ultimately agreed not only to exempt all defence spending above 1 percent of GDP from the debt brake, but also to the creation of a €500 billion special fund for infrastructure to be spent over twelve years. While a defence-only exemption was likely the initial preference of many within the CDU/CSU, the broader deal was key to bringing the SPD (and subsequently the Greens) on board and giving the incoming government further fiscal leeway for infrastructure investments. The Greens in particular insisted on the inclusion of fiscal guardrails and secured the allocation of €100bn from the infrastructure package to the German Climate and Transition Fund (KTF), thereby reinforcing the climate dimension that was absent from the original proposal. Notably, another €100bn of the special fund has been earmarked for state-level investment, accompanied by a partial relaxation of the debt brake for the Länder – an important concession, aimed at granting greater room for fiscal manoeuvre to states and their municipalities, whose support was essential for securing the Bundesrat’s approval. The move marked a sharp break from Merz’s campaign mantra, “reforms first, debt second” – a sequence that was, in the end, turned on its head.
For Merz, the move is being cast as either a decisive act of pragmatic leadership or, by critics, as a breach of trust, abandoning core campaign promises just days after his election victory. But regardless of the political framing, the result is a fiscal paradigm shift: a potentially transformative fiscal stimulus for Germany and a signal to European partners that Berlin is ready to shoulder greater responsibility. At a time of transatlantic uncertainty, the incoming government showed its commitment to bolstering European sovereignty and to remaining a staunch supporter of Ukraine, and the chancellor-in-waiting showed his willingness to expend political capital when he deemed decisive action necessary and succeeded in bringing his party along.
Against this backdrop, many eyes were on the coalition negotiations and agreement with a view to whether the government would also set ambitious goals for reforms, both at national and European level. Below, we will analyse what the coalition agreement between the CDU/CSU and SPD says on key EU policy areas: budget and economy, climate and European Green Deal, security and defence, migration, and lastly, institutional aspects of future of the EU.
What the coalition agreement says on key EU policies
Budget and Economy
On economic and budgetary policy, the coalition agreement fleshes out common ground between the CDU/CSU and SPD, deliberately leaving room for further specifications once in office. It avoids drawing stark red lines, instead opting for flexibility. However, despite the ardent pleas by Enrico Letta and Mario Draghi for strengthening the single market and enhancing the EU’s toolbox, as well as the central role the economy will play for the new government, this does not yet constitute a strong agenda for economic reform nor build a path for German leadership.
On the negotiations for the new Multiannual Financial Framework (MFF) past 2027, which will be decisive for the EU’s capacity to act, the coalition agreement does not present a detailed stance. Instead, it attempts to keep the door open to proposals from Brussels, while at the same time not discarding existing positions or sidelining the interests of regions and the agriculture sector. This balancing act results in partly contradictory plans. On the one hand, it explicitly acknowledges the Commission’s mantra that for the new MFF the status quo cannot be an option but needs to be able to address Europe's major challenges and support a geopolitically capable EU. For this reason, the agreement states that the MFF should be modernised to be simpler, more transparent, and flexible enough to respond quickly to unforeseen needs using available financial tools. And it emphasizes that the repayment of the NextGenerationEU (NGEU) debt should not come at the expense of the regular EU budget. On the other hand, the passage on cohesion policy can be read as a pushback against recent reform ideas from within the European Commission’s DG Budget on taking the Recovery and Resilience Plans under NGEU as a blueprint. The agreement rejects a centralisation of cohesion policy and wants to maintain the strong role that regions play in designing and implementing programmes – although it supports the incentivisation of national reforms. Similarly, the chapter on agriculture does not indicate a huge appetite for reform but instead points out that the Common Agricultural Policy (CAP) should remain a distinct policy area and continue to receive appropriate funding (without specifying what “appropriate” means).
The coalition agreement also does not fully close the door on new common debt at the European level. While it merely cites the Treaties’ legal requirement that Germany will not assume liability for the debts of other member states and that financing outside the EU budget should remain the exception, it does not explicitly rule out the possibility of joint borrowing at EU level in the future. This is important, in particular in the context of ongoing discussions on increased European defence spending. But it remains to be seen whether, when shove comes to push, Merz – who has already spent considerable political capital taking on immense debts at national level – will be willing to do the same for more joint European debt, especially when considering opposing voices from his own party.
The coalition agreement no longer refers to a potential reform of the (already recently reformed) EU fiscal rules, as a leaked draft of the Europe chapter had previously done. Now, the agreement simply states that the existing exemption clauses and flexibilities should be used if necessary due to the challenging security landscape. This is relevant because in particular the full implementation of the new €500bn special fund is likely to set the German government on a collision course with the current fiscal rules. But beyond the specific German case, critics have pointed out that a targeted reform of the fiscal rules to allow for more defence spending would be a more suitable approach than relying on the national escape clause of the current fiscal rules framework. This is because the latter may not provide sufficient predictability for long-term investments and differentiation between member states’ highly heterogenous fiscal positions, and it may open the door for highly indebted member states to increase spending in other areas, putting Europe's fiscal and financial stability at risk.
Regarding the mobilisation of private capital and financial integration within the single market, the text is short and not very ambitious. It combines the call for steps towards a true savings and investments union (SIU) with the commitment to protect the so-called ‘three-pillar’ banking system. In particular, the agreement stresses that a mutualised European deposit insurance scheme (EDIS) without preconditions would be rejected. The interests of saving banks and cooperative banks thus seem well represented also in the new government, while support for advancing the European agenda for addressing investment needs is rather non-committal. This is striking as the policy agenda for the two main elements of the newly labelled SIU – banking union and capital markets union – is well known and there would have been space in the agreement, similarly to the previous coalition agreement, to indicate which aspects the new government was hoping to shape. In particular, the French government will be keen to cooperate closely. The European dimension of promoting start-ups and scale-ups could have been stressed more. With the ‘Frühstart Rente’ (a government-supported establishing of a private pension provision for each child) and reference to reforming the occupational pension schemes, there are timid proposals for a stronger role for capital markets in the chapter on pensions. This topic will most likely gain more prominence due Germany’s ageing population, with the upshot that the national and European agenda could be combined.
The incoming government is committed to a unified European system of financial regulation. In this context, it seeks to refrain from ‘gold-plating’ (i.e., adding additional national requirements on top of EU rules). But it also supports the Commission’s ‘Omnibus’ initiative to significantly reduce and postpone the extensive requirements for EU sustainability reporting, particularly for small and medium-sized enterprises. This fits the overall goal of a comprehensive reduction in EU-level bureaucracy that was pushed in particular by the CDU/CSU in the campaigns but also supported by voices in the previous coalition government. On all the above issues, the SPD-led finance ministry will play an important role. Through this avenue, the finance minister will be able to shape the EU agenda of the new government.
The stance on the single market remains broad-brush on further integration and short on industrial policy measures. The agreement states that the internal market should be developed further as a driving force of Germany’s economic strength – with special reference to the areas of energy, medical products, pharmaceuticals, digital technologies, telecommunications, and transport. It calls for competition based on innovation and performance and rejects tax dumping and unfair tax competition within the EU, advocating thus for a common corporate tax base. A particular emphasis is put on a genuine Energy Union (see below). Moreover, it argues for accelerating approval procedures, modernising competition and state aid law – aligning it more closely with transformation needs and Europe's global competitiveness – and simplifying procedures for Important Projects of Common European Interest (IPCEI). The agreement recognises the importance of strategic sovereignty and the fact that key technologies, energy security, digital sovereignty (including support for European platforms), protection of critical infrastructures, and resilience are central to this. The chapters on different sectors in the coalition agreement spell out in slightly more detail measures to support strategic sectors and industries and feature occasional references to the European dimension.
All this is, however, less ambitious than what has been called for as a European industrial strategy in the Draghi Report and as a strengthening of the single market in the Letta Report. It remains to be seen what the new government will in fact do. There is the risk that with the economic pressure on the German economy, in terms of trade tensions, Chinese overcapacity and prolonged downturns in the economic cycle, this will further increase the new government’s inclination to undertake more domestic industrial support measures rather than pursuing a European agenda that is likely to take more time and be less targeted to the needs of German industry. Next to the chancellor, the CDU economic minister will play an important role but will likely be less interested in European industrial policy (in particular for the green transition) than were his predecessor, the Greens’ Robert Habeck, and his team.
On trade, the agreement is very much in line with Germany’s traditional stance on trade agreements and the US (despite the most recent developments). The text outlines support for a pragmatic and rules-based EU trade policy, emphasising the ‘EU-only’ principle in trade agreements. The EU aims to swiftly ratify signed agreements with Chile, the Mercosur countries, and Mexico, while also supporting ongoing negotiations with India, Australia, and ASEAN countries. A medium-term free trade agreement with the US is envisioned, alongside short-term efforts to reduce tariffs and avoid trade conflicts. Reforms to the WTO system are supported to ensure fair global competition, particularly regarding industrial subsidies. Notably, there is a clear difference in language regarding the US or when it comes to China. On the United States, the coalition agreement remains strongly attached to the transatlantic relationship as a “great success story for both sides” that must be continued “under the new conditions”. This is somewhat at odds with the strong language by Merz on the evening of the elections, when he argued that Europe needs to become more independent from the US. On China, the coalition agreement presents, in contrast to previous governments, a more critical stance with a strong emphasis on urging China to adhere to agreed rules and full reciprocity when it comes to trade and investment. The agreement spotlights the issue of systemic rivalry with China and the need to reduce one-sided dependencies and to pursue a policy of de-risking, including a pledge to “confront China with self-confidence and our own strength” where necessary.
Climate and the European Green Deal
The coalition agreement reaffirms Germany’s commitment to both European and national headline climate targets, including the country’s overarching goal of achieving climate neutrality by 2045. Crucially, in the context of ongoing EU-level debates, the future government has expressed its support for the European Commission’s proposed 2040 interim climate target – a 90 percent emissions reduction compared to 1990 levels. Yet this endorsement, pushed for by the SPD, comes with significant caveats: the agreement stipulates that Germany will not be required to exceed its own national climate pathway, which foresees an 88 percent reduction by 2040. In addition, it makes support conditional upon the inclusion of negative emissions and the (limited) recognition of certified, permanent emissions reduction projects in non-European partner countries.
While this position at first glance signals alignment with the EU’s climate ambitions, it risks opening a Pandora’s box. By allowing international ‘offsetting’ outside the EU, it could undermine the integrity of domestic climate targets, especially as political pressure may mount to expand such flexible approaches over time. Amid growing pushback against the 90 percent target from several member states and parts of the European People’s Party (EPP) group in the European Parliament, Germany’s stance may carry significant weight, offering a politically expedient path to preserving the target on paper, while opening the door to a less ambitious EU climate trajectory through to 2040.
On the campaign trail, the CDU/CSU strategically targeted the traffic-light coalition’s most contentious climate initiatives. Foremost among their demands was the repeal of the so-called ‘Heating Law’ – a politically charged label for the Building Energy Act, which mandates and incentivises a gradual shift towards renewable energy sources for newly installed heating systems – an act whose adoption had nearly collapsed the previous coalition. The incoming coalition will not scrap the law altogether but has instead agreed to reform it, with an emphasis on greater flexibility, simplicity and “technological openness” (though the existing legislation is hardly restrictive) as well as closer alignment with municipal energy planning. However, interpretations of what this reform should entail vary. The CDU/CSU, pointing to carbon pricing as the primary steering instrument, seeks to eliminate binding deadlines and standards. In contrast, the SPD favours a more moderate approach focused on adjusting existing efficiency criteria. The two parties also remain at odds over the scale of future subsidies for the shift to climate-neutral heating systems. The challenge ahead lies in swiftly bridging these differences to create a coherent reform package, crucial for avoiding investment uncertainty among households and companies – and for ensuring public acceptance of the upcoming EU-wide carbon pricing scheme.
Broader debates about the transition to climate neutrality in the building and transport sectors are set to regain traction across Europe with the upcoming expansion of the EU Emissions Trading System (ETS2), which will, as of 2027, extend carbon pricing to emissions from road transport and heating – two politically and socially sensitive policy areas. Against this backdrop, it is a significant signal that the coalition agreement explicitly reasserts Germany’s support for ETS2. This stance aligns with the CDU/CSU’s longstanding position that carbon pricing should serve as the key instrument for meeting climate targets. However, this commitment will soon be put to the test, as countries such as Poland, the Czech Republic and Estonia are already calling for a delay or watering down of the new scheme. Whether Germany will stand firm in defending ETS2 or soften its stance in response to domestic and external pressures will be central for the EU’s continued climate ambitions.
Aware of the political volatility surrounding ETS2, the incoming coalition underscores the need to shield consumers and businesses from abrupt price hikes. To this end, the prospective partners are pledging to mobilise resources from the EU Social Climate Fund to support vulnerable households – as already mandated by EU regulation – and to introduce socially tiered subsidies in the areas of housing and transportation. These will be crucial, especially given that the much-discussed climate bonus (‘Klimageld’), promised by both parties during the election campaign, is notably absent from the coalition agreement. Ensuring that carbon pricing is paired with adequate social compensation and targeted support for investments in climate-neutral alternatives will be essential if the coalition is to sustain public support and withstand calls to weaken the price signal critical for driving the transition.
The coalition agreement places a strong emphasis on restoring Germany’s competitiveness, identifying lower energy costs as a key lever. Accordingly, the incoming government pledges to reduce the national electricity tax to the EU minimum and to lower levies and grid fees to ease the burden on households and businesses. Additionally, the existing ‘electricity price compensation’ policy for companies exposed to indirect emission costs will be expanded, and a dedicated ‘industrial electricity price’ is envisaged for energy-intensive industries, within the bounds of EU state aid rules. However, this may pose a challenge as the measures do not follow a coordinated European approach and risk distorting the internal market by preserving energy-intensive production in Germany, even in cases where more favourable conditions may exist in other EU member states. More broadly, while the measures are a response to legitimate cost pressures, they come at a high fiscal price and risk crowding out more targeted, transition-oriented investments, particularly if financed with ETS revenues.
This tension is also reflected in the government’s ‘power plant strategy’, which aims to subsidise the construction of 20 gigawatts of new gas-fired capacity by 2030. In contrast to its predecessor’s approach, this expansion is significantly larger in scale and appears to lack explicit requirements for hydrogen readiness, which could help to align such infrastructure with EU climate objectives. Further plans to enable long-term gas supply contracts with international gas providers, facilitate domestic gas production, and promote the use of carbon capture and storage (CCS) for gas-fired power plants heighten the risk of locking in state-subsidised and fossil fuel-intensive infrastructure. This structural risk is compounded by the coalition’s intention to tie the pace of the coal phase-out – reaffirmed for no later than 2038 – to the timely deployment of new gas capacity. Additionally, reserve power plants are to be used not only as a safeguard against supply shortages but as tools for dampening down price volatility. Together, these measures risk institutionalising fossil-based capacities well beyond what is necessary – potentially prolonging Germany’s decarbonisation path to meeting EU climate targets.
At the same time, the future coalition partners underscore their commitment to advancing the energy transition, emphasising the expansion of renewables and the ramping up of energy storage as core pillars. Storage infrastructure is to receive privileged status when co-located with renewables and will be incentivised where it benefits the flexibility of power grids. To mobilise private capital, the coalition plans to establish a dedicated investment fund for energy infrastructure, backed by public guarantees. This investment agenda is closely tied to Germany’s aim of working towards a European Energy Union, forging connections through cross-border infrastructure. Delivering on this goal, however, will also require Germany to make concessions, ensuring that the costs and benefits of joint projects are fairly distributed among member states.
In parallel, the incoming government vows to continue the federal-state process for accelerating planning and permitting procedures, and to swiftly implement the Renewable Energy Directive III. In the interest of simplification, grid expansion is to proceed via overhead lines where feasible, reducing costs and accelerating rollout. However, the stated aim to “synchronise” grid and renewable expansion risks being used as a pretext for slowing down solar and wind energy deployment. A narrow focus on short-term cost containment would ultimately prove strategically short-sighted – merely postponing necessary investments, undermining long-term energy affordability, and complicating the broader industrial transformation.
Transport remains a persistently problematic area for Germany’s climate ambitions. Emissions in the sector have barely declined despite its critical role in meeting national targets. At the same time, Germany’s automotive industry is under mounting pressure from intensifying competition, particularly from Chinese car makers, as well as comparatively high manufacturing costs, management missteps, and stuttering demand – especially for electric vehicles (EVs), which are key to the sector’s transformation. But while both coalition partners have identified the preservation of Germany’s automotive hub and industrial jobs as a political priority, they have not always agreed on the policy recipe for tackling transport transition. The CDU/CSU has prioritised easing regulatory pressure – criticising the 2035 phase-out of fossil fuel-emitting cars and EU fleet emission targets while advocating for “technology neutrality”. In contrast, the SPD has leaned more heavily on industrial policy tools to actively support the sector’s transformation. The coalition agreement reflects this balancing act. Regulatory relief features prominently, including a pledge to prevent penalty payments under existing fleet emission limits, an accelerated review of CO2 reduction targets for heavy-duty vehicles, and a carefully worded rejection of any blanket legal quota for EVs at the EU level – a compromise formulation that glosses over the differing views and leaves unresolved whether the new German government will ultimately support or seek to revise the 2035 phase-out of fossil fuel-emitting cars. Simultaneously, the agreement outlines subsidies for investments in value chains for EV batteries and demand-side incentives to re-energise electric vehicle adoption, such as a support programme for low- and middle-income households. Yet several measures raise questions about targeting and strategic coherence – particularly tax breaks for premium electric company cars and incentives for plug-in hybrids (PHEVs) and electric vehicles with range extenders (EREVs).
Additional measures like increasing the commuter tax allowance and reinstating fossil fuel subsidies in the agricultural sector may provide short-term relief and political cover but come with a high price tag and undermine climate incentives. More positively, the agreement proposes channelling resources into the construction of a nationwide EV charging network, fleet conversion to climate-neutral buses in public transport, and a dedicated railway infrastructure fund to finance cross-border and domestic rail projects, including key corridors to Poland and the Czech Republic.
Taken together, the coalition agreement signals continued alignment with the EU’s climate agenda, without marking a full-on rollback of climate policies established by the previous government. Yet, while reaffirming its commitment to meeting headline climate targets, the overall approach of the incoming government appears more cautious and calibrated to short-term industrial viability. Noticeably, the political framing of climate policies has shifted – less focused on embracing the opportunities of the transition or its necessity for future generations, and more on ensuring the German economy’s cost-competitiveness during the transition. This is also reflected in the decision to move the climate portfolio back to the SPD-led environment ministry, separating it once again from the previously all-powerful ministry of economy and climate under Habeck. Mixed signals on fossil fuel infrastructure, as well as caveated support for the 2040 interim target, raise doubts about whether Germany will accelerate mitigation efforts at the pace required to meet EU objectives. Much will depend on whether the incoming government uses its fiscal headroom to adequately cushion those most affected by the green transition, to incentivise targeted green investments, and to drive necessary structural change instead of shielding incumbent industries under the banner of economic pragmatism.
Defence and Security
Defence and security play an important role in the agreement and complement the big fiscal announcements – although two aspects are striking. First, there is a tension between the EU-orientation of the European chapter and the more NATO- and national industry-orientation in the text’s international/defence parts. Second, the language on the US is less strong and more traditional than what might have been expected after recent weeks, as is the overall tone – which may also reflect differences between the CDU/CSU and SPD.
As a guiding principle, the coalition agreement states that Germany/Europe should be able to defend itself, so that it does not need to do so. Reflecting this priority, the plan is to develop the Federal Security Council into a National Security Council in the Chancellery, with the goal of achieving an integrated security policy and to guide strategic foresight. For a holistic crisis management approach, a cross-ministerial and federal-state crisis task force and a national situation centre in the Chancellery would be established. The effectiveness of these institutional innovations is as yet unproven, though the fact that the Chancellery and the foreign ministry will both be in CDU hands should help to minimise frictions – at least between the two entities (as was arguably the case with the previous incumbents). While the text’s chapter on Europe argues that Germany should aim to take a leading role in further developing the EU’s Common Security and Defence Policy (CSDP) and that a genuine European Security Union should be realised within the EU, other parts of the coalition agreement are much more NATO-oriented: the new government seeks to strengthen EU–NATO cooperation and make more use of intergovernmental forums like the E3 (Germany, France, UK), potentially involving other non-EU countries. There is still a commitment to nuclear sharing within NATO but the agreement does not address the threat of the US potentially withdrawing from the alliance, nor does it explore the idea of a possible nuclear sharing arrangement with France. Merz has signalled, shortly after the elections, openness for a European arrangement – which is an area for a possible joint Franco-German initiative as part of broader proposal on common defence.
Support for Ukraine is a strong feature in the coalition agreement. Merz himself has reiterated his intention to support giving Taurus missiles to Ukraine. Prospective NATO membership for Ukraine is supported, despite the White House’s recent rejection of this proposal and the new reality that this entails.
In terms of strengthening the defence industry and increasing defence spending, there is a clear commitment to aligning spending levels with NATO capability targets and to strengthening the defence industry, but ambitious or even specific references to European initiatives are lacking. The agreement states that European cooperation in arms procurement should be expanded and must lead to simplification, standardisation and scale – criteria often mentioned by Merz during the election campaign. Yet there are no remarks on more common finances or joint borrowing for EU defence spending. In line with the reform of the debt brake, German defence spending at the national level is planned to increase significantly and consistently by the end of the legislative period. However, the typical legislative term is generally agreed as too short for major defence procurements to be undertaken. Therefore, a multi-year investment plan is intended to ensure long-term defence capability and a more reliable planning horizon for the industry. Finally, on the contentious issue of military service, the new coalition does not (yet) reintroduce compulsory service, as supported by CDU/CSU, but instead speaks of “a new and attractive military service, initially based on voluntariness”. As the defence ministry will be headed by an SPD minister, it is likely that the current defence minister, Boris Pistorius, will remain in post.
Migration
Migration was one of the most contentious topics during the election campaign. In response to a series of attacks before the election, Merz sought to project decisiveness on the issue, even at the expense of European migration rules and Schengen principles. The SPD, while not necessarily opposed to stricter migration rules – in fact, the previous government under SPD chancellor Scholz had already put in place more restrictive policies – firmly rejected any national-level plans that would be at odds with EU law or which could be seen as a snub by other European states. The conflict came to a head over the CDU/CSU’s push for blanket rejections of asylum seekers at the German border. This was widely considered not only as a breach of Union law but also as an affront to Germany’s neighbours, some of which had indicated that they would not take back rejected migrants at their borders.
The compromise in the coalition agreement now stipulates that asylum seekers may be rejected at the German border “in coordination with” Germany’s neighbouring states. What this means exactly has been interpreted differently by various parties. Merz has hinted that he has been in talks with neighbouring governments for coordination purposes. But even if the incoming government manages to put this plan into practice without provoking a backlash from its neighbours, the measures would still run counter to EU law, which prohibits turning away asylum seekers at member states’ borders without due process. At the same time, it needs to be acknowledged that this increasingly strict national migration policy is well in line with developments at EU level and in other EU countries, which have long been advocating for stricter rules in this field. With the interior ministry in CSU hands, Merz’s plans should be implemented with little frictions. Nevertheless, the migration issue is perhaps one that transcends the policy field itself as it points to possibly a more worrying problem with the incoming government under chancellor Merz: that despite an explicit pro-European commitment, the impulse to undermine a joint European approach in the name of a perceived national interest could prevail.
In addition to rejecting incomers at the borders, the incoming government has agreed to continue border controls, introduced by the previous government, until such time as there is “a functioning external border protection and fulfilment of existing Dublin- and CEAS regulations”. The coalition agreement also commits to implementing the CEAS reform during 2025 and to develop it further at the EU level. In this regard, Merz has already hinted at his intention to align Germany with a group of 15 EU member states – including far-right hardliners such as Italy’s Georgia Meloni – pushing for migration measures that go beyond the CEAS reform. This includes a possible German-led initiative to scrap the so-called ‘connection element’, a feature of the ‘safe third country’ concept, effectively lowering legal barriers when it comes to returning asylum seekers to non-EU countries with which they have no prior link. Adding to the intra-coalition tensions, Merz has publicly stated his aim to reduce annual asylum applications to below 100,000. His rhetoric and policy positioning are unlikely to sit comfortably with the SPD’s base, for whom even the agreed compromise already pushes political boundaries, and who have yet to sign off on the coalition agreement.
Future of the EU
The institutional and overarching elements in the Europe chapter of the coalition agreement are pro-European but without the federalist ambitions of the previous government. There is a clear commitment to a strong, democratic Europe, and to advancing European solutions – this time with a more assertive role for Berlin. The agreement stresses the need for an “effective, coherent and reliable” German EU policy – a clear nod to the previous German traffic light coalition which had increasingly become a symbol in Brussels of German absence and unreliability. It also asserts that Europe must be defended not only against external threats, but also against malign actors from within.
In this vein, it is strongly worded on the protection of EU values and the rule of law. The incoming government vows to take more decisive action against rule of law breaches. This includes the use of infringement proceedings, the freezing of EU funds and the activation of the Article 7 TEU procedure to suspend voting rights in the Council. This passage has been widely interpreted as a warning to the Hungarian government under Viktor Orbán. Furthermore, the CDU/CSU and SPD express their intention to reform the conditionality mechanism, which currently permits financial sanctions only when breaches of the rule of law can be directly linked to the EU budget, into a more comprehensive sanctions instrument. Overall, this is a welcome sign: if the next government follows through on these points, it would be a significant step forwards in protecting the EU’s core values.
On institutional reforms, the coalition agreement has few new ideas but does include some notable points. For example, the coalition wants to introduce qualified majority voting for more decisions under the Common Foreign and Security Policy (CFSP), stating that the consensus principle should not become a “brake on decisions” in any policy area. This shift is to be pursued through the EU’s passerelle clauses. Like its predecessor, the incoming coalition remains open to Treaty change. While this openness is welcome, it will not suffice on its own: to truly make a leap on Treaty amendment, it would require Germany to invest genuine political capital in building consensus among national governments. Interestingly, the coalition agreement is silent on reforms for strengthening EU-level democracy. Proposals like enhancing the role of the European Parliament or introducing transnational lists are absent. A reference to strengthening European political parties and supporting the Spitzenkandidaten principle – present in a leak of the first draft of the chapter on Europe – has now been excised from the final agreement. This omission is in line with the CDU/CSU’s more intergovernmental than supranational approach to European integration.
The incoming coalition, like the previous ones, remains strongly committed to EU enlargement as a geopolitical necessity. At the same time, it stresses not once but twice that EU enlargement has to go hand in hand with internal reforms. This is a sensible approach. The coalition agreement explicitly advocates for the introduction of staged accession for enlargement, stating that progress in aligning with EU values and standards should lead to gradual benefits. These include the phasing in of candidate countries into EU programmes and policies, observer status in the European Parliament and Council, and even “associate membership” for CFSP/CSDP matters albeit without voting rights. The agreement also distinguishes clearly between candidate countries: while there is strong support for a rapid accession of Ukraine, Moldova and the six western Balkan countries, the coalition distances itself from both Turkey and Georgia.
In line with the current Zeitgeist, the incoming government also advocates for a stronger use of differentiated integration. While it emphasises that any form of “Europe at different speeds” must remain open to all member states, there is also a tilt to more intergovernmental formats – particularly in foreign policy – that include non-EU member states, notably the UK, which is cited as one of the closest partners of Germany and the EU, both bilaterally and within NATO. The incoming government aims to conclude a bilateral friendship treaty with the UK – a promising development but also low hanging fruit as negotiations have been ongoing and are relatively advanced. The European Political Community is also mentioned as a means of enhancing dialogue and cooperation with third countries. While increased reliance on coalitions of the willing makes sense, not just to include non-EU countries but also to perhaps exclude certain EU member states, it carries the risk of new intergovernmental formats being used to circumvent or undermine supranational institutions and structures. While the coalition – and in particular chancellor-to-be Merz – seems to have, as mentioned previously, a predilection for intergovernmental approaches, it should take care to involve the European Commission and Parliament in new endeavours where appropriate.
The importance of improving Germany’s bilateral relations with France and Poland, which were a key theme in Merz’s campaign, is reflected in the coalition agreement. He had announced trips to Warsaw and Paris on his first day in office, thus expanding on the traditional visit to Paris as first visit abroad of any newly elected chancellor and nodding to the growing importance of the so-called Weimar Triangle. The Franco-German friendship is highlighted in the document as one of outstanding importance for the whole of Europe. Merz wants to use the remaining two years of President Macron’s term and to send early on a strong joint signal of Franco-German leadership. In an ambitious scenario, this could be a package covering thorny questions on which Germany and France have traditionally been at odds. On defence, for example, this could include a widening of French nuclear deterrence, more common defence financing, and an avowedly European industrial strategy on defence; on energy, a comprise on nuclear energy (opposed by Germany) but with strong commitment by France on integrating markets and developing cross-border energy infrastructure; or on trade and finances, a narrowing of the divide on trade agreements and joint leadership on SIU and the upcoming MFF negotiations. It should however be noted that while president Macron remains in office until 2027, a minority government dealing with severe budget challenges is currently in charge, and new legislative elections could reshape the political landscape as soon as the summer of 2025. The incoming government also wants to further nurture Polish-German relations, not least through the swift creation of a memorial site for the victims of German aggression and occupation in Poland during the Second World War and the establishment of the German-Polish House as a place of remembrance and encounter in Berlin. The Weimar Triangle is intended as a platform for the coordination of all relevant EU policy matters.
The coalition agreement also seeks to improve EU coordination within the new government. One proclaimed goal of Merz was to abolish so-called ‘German votes’” at the EU level – instances where Germany abstains at EU level due to failure to find a common position. As such, the agreement foresees the establishment of a weekly coordination round in the Chancellery at state secretary level, dubbed “EU monitoring”, to clarify any interministerial conflicts as early as possible. Where this is not feasible, issues are to be escalated to the cabinet. In general, also in place would be the coalition committee, comprising high-ranking representatives of all three coalition parties to hammer out compromises, adding another level of coordination and political steering. Perhaps more importantly, there is a notable centralisation of EU coordination within CDU hands. All three ministries in charge of EU coordination – the Chancellery, the foreign ministry and the economy ministry – have been allocated to the CDU in the coalition agreement, giving Merz a significant strong grip on the levers of EU policy. Whether this approach will ultimately lead to the abolishing of ’German votes’ remains to be seen. After all, the phenomenon was not unique to the traffic light coalition but has long plagued previous German governments.
Lastly, the German coalition agreement prohibits any cooperation between the coalition partners and anti-constitutional, anti-democratic and far-right parties, meaning the AfD, “at all political levels”. This also implies no more cooperation between the EPP and Europe of Sovereign Nations (ESN) groups, in which the AfD sits, in the European Parliament, at least for the German delegation. During the negotiations, the SPD had wanted an even stronger wording, which would have explicitly prohibited any relying on majorities with the help of the European Conservatives and Reformists (ECR), Patriots for Europe (PfE), or ESN factions in the European Parliament, but this language did not find its way into the final agreement. Whether the clause can actually be enforced in Brussels is debatable. Much will also depend on how Manfred Weber, the EPP leader, chooses to interpret its scope. In addition, the term “cooperation” is not defined in the agreement, leaving room for interpretation as to whether, for example, merely accepting AfD votes in support of a particular policy would in fact constitute a breach of this commitment. While such a scenario is unlikely at the federal level, where it would almost certainly lead to the collapse of the coalition, it remains a conceivable scenario at other political levels. The next German government will also be judged by whether or not it will be able to enforce this clause in municipal, regional and European contexts.
Conclusion
Merz’s pledge to provide clearer and more robust German leadership in Europe has resonated across the continent – and, in some ways, his incoming government has delivered before even taking office. By relaxing the debt brake for defence spending and setting up a €500 billion special fund for infrastructure, the prospective coalition has signalled that Berlin is ready to shoulder greater responsibility and is prepared to unleash Germany’s fiscal potential in a way that could mark a turning point for the EU. The next challenge, however, will be whether Merz’s government can match fiscal boldness with policy substance, delivering not just on debt, but on concrete policies and reforms, at both the national and the European level. In this regard, the coalition agreement offers more direction than detail.
Some of this vagueness can be attributed to the urgency of the negotiations, which had to conclude swiftly and, given the prevailing geopolitical instability, a less detailed agreement may even be argued to offer more flexibility. Yet it also carries the risk that glossed-over conflicts will resurface during the legislative term, potentially paralysing the government. Indeed, some of these pressure points have already been exposed in the immediate aftermath of the coalition negotiations when, in the race for interpretation, CDU/CSU and SPD representatives put forward different views on contentious questions. This ambiguity is all the more problematic against the background of eroding political trust on the domestic stage. If his move on the debt brake earned Merz a significant boost of trust at the European level, where it was greeted with headlines proclaiming “Germany is back”, it came at the cost of a large slice of the trust dividend he had only just been granted at the polls. Winning back that trust among broader swathes of society will require Merz to exercise leadership within both his coalition and the EU in a way that is inclusive and reliable, rooted less in political point-scoring and more in the spirit of genuine compromise. Citizens are ready to support: a large majority wants a European Union that provides protection and acts united against the huge challenges that the continent is facing.
Photo: CC Massimo Virgilio on Unsplash